Jul. 13, 2009 – A statistic that has immense ramifications

Either you are or you’re not.
That’s how I’ve always felt about people’s interest level in statistics. Either the sight of them causes an involuntarily yawn or they just suck you in. I’ve always been among the latter group.
It started with box scores. I could throw the newspaper’s protective covering off the daily sports section — think the covering was called World News? — and just absorb baseball scores for hours.
The fixation for numbers briefly subsided after a bad case of geometry but it has since returned. The latest number that has really captured my interest: the comparison of used motorcycle sales to new unit sales in the United States.
3.07.
That statistic, courtesy of R. L. Polk & Co. and its Polk View (www.polk.com/knowledge/pv08/), is actually a projection. But it’s absolutely staggering. This year, the ratio of used motorcycle units that are sold in the United States compared to every one new unit could reach 3-plus, according to the report.
Consider that just two years ago that number was 1.5 and last year it was in the neighborhood of 1.8, according to Polk, which analyzes state registration data.
That quantum shift is why people infinitely familiar with the preowned part of the industry roll their eyes at the idea that the used business has somehow diminished at or near the same rate as new unit sales during the economic slowdown.
Nothing could be further from the truth.
Data compiled by Polk shows preowned sales — those done between private parties and/or with dealers — increased 6 percent in the first quarter of this year compared to the prior-year period. That’s for all powersports segments.
In contrast, new unit sales from all powersport vehicle categories reported by the Motorcycle Industry Council were down more than 30 percent in the first quarter.
That’s a huge difference, and one I’m betting will not be wholly different for the second quarter and perhaps even the third quarter.
That’s not to say the preowned vehicle is, in itself, the recession’s magic bullet. At a recent San Diego auction I attended, a metric dealer lamented his loss in used sport bike business, a business that had been extremely profitable for him in recent years. The problem? A lack of financing.
So yes, some of the hurdles in the new unit business are following the preowned business as well. But as the Polk data indicates, there are enough remaining advantages in the preowned business that used sales should now represent a greater chunk of the overall dealership revenue.
In 2007, we asked in a national dealership survey how much of a dealer’s total annual sales were derived from preowned units. For metric dealers, it was 13 percent. For Harley dealers, it was 17 percent.
Is there any reason that percentage shouldn’t climb by 5-10 points this year? Maybe higher?
Before you answer, consider another staggering statistic uncovered by Polk. Nashville, Indianapolis, Louisville, Chicago and Cincinnati all have one thing in common: In the first quarter of this year, their used motorcycle registrations increased by at least 20 percent over the year-ago period.
Twenty percent!
That percentage takes on even more meaning when you consider the new cliché that has become part of our business lives: “the new normal.” Translation: Anything that isn’t in a spiral mode and is at or near flat compared to last year is actually cause for celebration.
What’s difficult, in fact all but impossible, is to figure out how successful we as an industry are at capturing that used market. In other words, in all of the used vehicle transactions going on out there, how often is a dealer a party to it? That information is not something Polk can capture with any consistency because states often don’t require that kind of information on registration forms.
But surely there must be considerable room for improvement in this regard, seeing how dealerships have devoted so much time and effort to new bike sales, an industry segment that until 2007 had been on a prolonged climb.
But 2009 in all likelihood will represent the third straight year of decline for on-road motorcycle sales and what the following year will bring is incredibly murky.
To rely heavier on preowned sales seems not only the safe move, but the smart move. We think so highly of that profit center that it was an obvious seminar choice for us in choosing the line-up for our upcoming
Powersports Business Conference & Expo. At the Indianapolis event to be held later this summer, we’ve asked longtime dealer consultant and 20 group provider Gart Sutton to speak on the key profitability issues regarding used vehicles.
3.07.
That number — the projection of used to new sales in the United States — should be posted somewhere in your office in large bold font, regardless of your appetite for statistics. psbNeil Pascale is editor-in-chief of Powersports Business. He can be reached at npascale@affinitygroup.com.

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